United States

WOTC certification forms submission deadline extended to June 29, 2016

Notice 2016-22 provides transition relief for retroactive 2015 WOTC claims

TAX ALERT  | 

The IRS recently issued Notice 2016-22 to provide guidance and transition relief to employers claiming the Work Opportunity Tax Credit (WOTC) under sections 51 and 3111(e). The WOTC allows a credit for a portion of wages paid by taxable employers that hire employees who are members of targeted groups or wages paid by tax-exempt organization (as defined under section 501(c)) who hire qualified veterans. Many of the provisions of the WOTC were retroactively extended by the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) through Dec. 31, 2019. The PATH Act also amended the WOTC provisions to expand the definition of targeted groups to include qualified long-term unemployment recipients. The WOTC allows employers a credit for a portion of wages paid to certain new employees who are qualified veterans or are members of targeted groups.

Before an employer can claim the credit, it must obtain certification that an individual is a member of a targeted group. To obtain this certification, an employer must (1) obtain certification from a state employment security agency, known as a designated local agency (DLA), that a prospective employee is a member of a targeted group on or before the day that individual begins work, or (2) complete a pre-screening notice (Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit) for the prospective employee on or before the day that individual is offered employment and submit that form to the DLA no later than the 28th day after the individual begins work. The employer must also submit a Department of Labor Employment and Training Administration (ETA) Form 9061 (Individual Characteristics) or Form 9062 (Conditional Certification) to the DLA. As the WOTC was retroactively extended to apply to 2015, employers needed relief from this 28-day submission requirement in order to claim any credits retroactively available.

The notice provides that employers now have until June 29, 2016, to submit Form 8850 to DLAs for members of the following targeted groups hired between Jan. 1, 2015, and May 31, 2016:

  • Qualified IV-A recipients
  • Qualified veterans
  • Qualified ex-felons
  • Designated community residents
  • Vocational rehabilitation referrals
  • Qualified summer youth employees
  • Qualified supplemental nutrition assistance program benefits recipients
  • Qualified SSI recipients
  • Long-term family assistance recipients

The June 29, 2016, deadline also applies to an employer that hires a qualified long-term unemployment recipient between Jan. 1, 2016, and May 31, 2016. The term qualified long-term unemployment recipient means any individual who is certified by the DLA as:

  • Being in a period of unemployment not less than 27 consecutive weeks
  • Being in a period of unemployment that includes a period of time in which the individual was receiving state or federal unemployment compensation

This guidance and transition relief provides employers with an opportunity to review their 2015 and 2016 hiring history and retroactively obtain certifications for employees falling under the definition of targeted groups or qualified long-term unemployment recipients in order to claim the WOTC on their 2015 and 2016 tax returns.

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